Put Me in Coach!

Quick Thesis: Coach, Inc. (NYSE: COH) is solid free cash flow story which many investors have overlooked as they focus on the newly public (and faster growing) Michael Kors (NYSE: KORS). The primary concern is that sales will continue to decline and the multiple contraction at Coach will not be short lived as KORS takes share. While KORS trades a premium multiple and is priced for perfection, COH has been left for dead. The stock sits 36% below its 52 week high after missing 2nd quarter earnings on slowing sales. Current multiples make COH a compelling “value” story – with a market cap of $14.4 billion and trading at 13.6x and 8.1x consensus EPS and EBITDA
estimates, respectively, the stock trades at historically low levels. Continue reading

Carnival Cruise Lines – This Time it’s Different

Quick note: It seems like it was a year ago when I wrote that the selloff in Carnival Cruise Line (NYSE: CCL) shares after the Costa Concordia ran aground was overdone. Looking back, it was actually 419 days. At the time the shares were trading at $31.56. The shares subsequently recovered to a high of $39.95. A solid 26.6% return. Today the shares closed at $34.95, still up 10.7%, but 12.5% off the highs.

Last time, I gave a number of reasons why I thought the shares were attractive. As the saying goes, this time, it’s different. Continue reading

Cash America (CSH) – Quick Recap

When I wrote last weekend about Cash America International (CSH – NYSE), the stock was trading at $41.76. On Friday, the stock closed at $48.08, a gain of 15%. In the post, I wrote that the shares had the potential to rise “15%-20% over the coming year.” I definitely didn’t think it would get the entire gain in one week. So what happened? Continue reading


I recently ran a screen for mid-cap companies that could best described as “value” plays. The goal was to find companies that weren’t broken, but for one reason or another had either lost their way or had been left behind by investors. Twelve names appeared on the list. I have done work on two of the names. I am currently long both. The first – Superior Energy Services (SPN – NYSE) is up over 7% since I got in less than 2 weeks ago. Given the run, I will save that topic for another time. The second, which is the subject of this article, is up just over 2% since I initiated my position. Over that period, the market is up approximately 1%.

Elevator pitch: recession resistant sector; focused on an underserved market; as consumers see lower take home pay as a result of higher payroll taxes, demand could rise as their spending habits will be slower to adjust; finally, the business should benefit from a rise in gold prices. The focus of this post has a number of additional positives. The company has grown book value per share each of the last five years at an average rate of 16% (Warren Buffett would be proud). Net revenues and EBITDA have grown an average of 14% and 16%, respectively, over the past five years. The opportunity lies within the depressed EBITDA margin which is 200 basis points below the 5 year average (as a result of several management missteps). If the company is able to get just half of the lost EBITDA margin back, the shares would rise by over 8% – without multiple expansion. The stock trades at a significant discount to the market multiples of comparable companies and sits 31% below the all time high reached in September 2011. It’s not all gumdrops and rainbows. Regulatory risk is an issue but seems largely priced in the shares. Interested? If so read on to find out why these shares have the potential to rise another 15%-20% over the coming year.

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Indecent Proposal for SuperValu?

As the Staples commercial goes: “That was easy”. On my birthday, SuperValu (SVU) gave you – my valued readers/followers – a present. The gift came in the form of an agreement to sell its “banners” to an acquisition consortium lead by Cerberus. The deal consists of $100 million in cash and the assumption of $3.2 billion of debt. More importantly, for SVU shareholders, the transaction comes in the form of a $4.00 per share tender offer for 30% of the outstanding shares.

At the time of my bullish post, the shares traded at $2.68. At Friday’s close, the shares were trading at $3.53 – a nice return of 31.7%. If successfully completed, the total return since my post would equal 49%, an additional 13% higher than the current price. Similar to my post “Down So Long it Looks Up – Zipcar”, the announcement of the SVU transaction touted the fact that it the offer was a 50% premium to the 30 day average closing price. However, it failed to mention that SVU shares traded north of $7.00 one year ago (or that it was trading at $5.29 in July when it announced that it had hired bankers to perform a “strategic review”). So the question remains, is the offer high enough and what is a shareholder to do now?

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Down So Long it Looks Up – Zipcar

Case closed. I first wrote about Zipcar (ZIP) on April 19, 2011 when the stock traded north of $26. Then I revisited the stock in July of 2011 when the stock was trading at $22.51 (after having touched $19.35). In the post, I stated that “While I would applaud the fact that the underwriters’ analysts came out of the gates with “Neutral” ratings. I don’t think they went far enough”. Today, almost 18 months later, this hit the wires: “Avis Budget Group to Acquire Zipcar for $12.25 Per Share in Cash”. The companies involved touted the deal for its “49% premium over the closing price on December 31, 2012”; however, the release failed to mention that ZIP went public less than two years earlier at a price of $18. By my math, that means the take-out price was 31.9% BELOW the IPO price. Not to mention, the stock had a bubblicious IPO stock pop and opened up at $30 – this means the average investor is down far more than 32%. If you shorted the stock when I first wrote about it, you gave back some of your gains with today’s pop, but you’re still up over 53% (I would hope you took gains long ago – pigs get slaughtered!). What happened? Continue reading

Deal or No Deal…Confessions of a SuperValu Long

This post is about a company that has been all over the headlines lately. As I tweeted two weeks ago, I went “all-in” on SuperValue (NYSE: SVU) when the stock traded at $2.38 (my average cost is north of that figure). Why did I put all of my chips on the table? After “running the numbers,” I concluded that deal or no deal, SVU offers substantial upside.

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Accountability – Taking Stock

Anonymous bloggers are often discredited because they hide behind a veil of secrecy. As such, they don’t have to suffer the consequences of their actions/comments. However, we at Stone Street Advisors have argued that anonymity is not always “bad.” Many of my followers know who I am and what I do for a “living.” I prefer to “labor in shadows” in an effort to keep my writing uncompromised from corporate edicts. I digress. This is a short note to take stock of my posts over the past two years. Continue reading

Time to Set Sail with Carnival?

Television screens and newspapers have been inundated by pictures of Costa Cordia listing off the shore of the island of Giglio. While this is a PR nightmare for Carnival Corporation & plc (NYSE: CCL), could it be an opportunity for intrepid investors? On Tuesday, the first day the US shares traded after the ship ran aground, the shares tumbled 13.7%. With 780 million shares outstanding, the drop equaled $3.7 billion in market capitalization. On that day, I tweeted that the sell-off was overdone. The shares have since recovered 6.6%. Did you miss the boat? To find out, read on. Continue reading

12 Things You Should Know Before Buying BJ’s Restaurants in 2012

I’m baaaaaack, happy New Year! Presented without graphics. I have been watching BJ’s Restaurants, Inc. for several months to see if the stock would fall from its Icarus like heights. The short story is that during the time I was on the sidelines, it has yet to come back to a level that seems more “attractive” to my somewhat trained investment eye. For my first post of 2012, I present to you my top 12 reasons why you would be better served to buy one of the menu items before buying the stock: Continue reading